"It seems to me that there is a political element within Gazprom [Russia's state gas company] and within the Russian government that wants to continue to exert control over Ukraine over gas supplies, and sees any sense of an involvement of the European Union in Ukraine as further encroachment on Russia's sphere of influence."

Gas monitoring

The EU has not said how much money it will commit to the upgrade, but Yulia Tymoshenko, Ukraine's prime minister, has said the project would need $7.5bn. The EU estimated the cost at $3.4bn.

Yushchenko said: "We are determined to improve the functioning of the gas market and root out all kinds of corruption and make sure that the system works to the benefit of all.''

He said a key priority was building gas metering stations to improve the monitoring of gas passing through Ukrainian pipelines.

The deal also intends to improve both the safety and capacity of Ukraine's pipelinenetwork and revamp its management, to allow Western investors to put up moneywithout fear of losing any of it to bureaucracy or corruption.